The giants of Silicon Valley have a lot in common with Laura Ingalls Wilder, who portrayed her life on the prairie as a triumph of self-sufficiency, barely mentioning that the government underwrote the railroads, provided the farmland and tided the family through rough winters.
Tech companies, too, like to tell stories in which government rarely appears except as an outside force threatening to break the beautiful things they’ve created with their minds and their hard work. The part of the story that doesn’t get told is how Silicon Valley’s successes have relied on the steady support and occasional dramatic interventions of the federal government.
On Tuesday a federal judge ordered Alphabet, the company better known as Google, to share some of its search data with its rivals. The decision is intended to limit the dominance of the company’s internet search engine, which was ruled an illegal monopoly last year. The government had sought to break up the company, which Alphabet decried as a “radical” intrusion on its business, and the court decided not to go that far. But the decision still marks an overdue return to the government’s longtime role.
Antitrust regulators repeatedly intervened in the 20th century to limit the power of big tech companies, which created room for new firms to emerge. The business historian Alfred Chandler wrote in his 2001 book, “Inventing the Electronic Century,” that in the mythos of Silicon Valley, the role of the gods — the invisible hands that shape human events — has in fact been played by the “middle-level bureaucrats in the U.S. Justice Department’s antitrust division.”
The government abandoned that role in recent decades, allowing a small handful of tech firms the luxury of growing old without any real threat to their market dominance. As new technologies emerged, Alphabet and its peers bought and swallowed them, in much the same way the Greek god Kronos ate his children to prevent their emergence as rivals. The most recent chapter in this story is how the biggest tech companies have absorbed the pioneers of artificial intelligence, so that the profits from the next generation of innovations will flow to the same shareholders whose firms dominate the current era.
Alphabet in its current form — huge, and hugely profitable — is the beneficiary of two large doses of good luck. The company benefited from the final round of federal interventions around the turn of the last century, and then it benefited even more from the absence of further interventions.
It’s about time the government created room for the next generation of innovators.
Google’s story doesn’t really begin in the 1990s, with the co-founders Sergey Brin and Larry Page figuring out how to index the internet. It starts a half-century earlier, when antitrust regulators forced early technology firms like AT&T and RCA to share their patents, opening up the space in which the computer industry began to emerge. A generation later, in the 1970s, the authorities forced IBM, the most successful of the early computer companies, to allow other firms to write software for its machines. One of the companies founded in the space opened by that government intervention was called Micro-Soft. It dropped the hyphen in 1976.
Fast-forward to the 1990s, and Microsoft had become so dominant that the government intervened once again, reaching an agreement with the company in 2001 that prevented it from controlling the development of the internet. Google seized the opportunity.
Silicon Valley still likes to think of itself as a place in the throes of perpetual revolution. Alphabet, Meta and the other titans of tech insist the good times could end at any time, because new technologies could upend their business models. Mr. Page has insisted that on the internet, “Competition is one click away.” But without the restraining hand of government, it’s easy for the big companies to squash competition.
That’s the thing about free markets: They work best under the aegis of government.
It’s important to note that curbing big companies doesn’t kill them. Though RCA is no longer with us, Microsoft, IBM and even AT&T all remain large and profitable. The government didn’t destroy their businesses; it created room for new ones.
While the Trump administration deserves credit for pushing ahead with the case against Google, which was initiated under President Joe Biden, that shouldn’t be taken as a sign of a broader commitment to restrain corporate power. The Google case instead is reminiscent of the Reagan administration’s successful effort to break up AT&T in the early 1980s, just when it was pulling back from almost every other kind of antitrust enforcement. The Google case is a targeted act against a specific company, not a manifestation of some broader economic policy.
Yet, as was the case with the breakup of AT&T, acting against one company when that company is big and central can still have broad economic benefits.
We don’t know what companies might emerge in the spaces created by constraining Google. The government’s role is to create those spaces. The rest is up to those celebrated programmers working in their bedrooms and garages, trying to build the next big thing.
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Binyamin Appelbaum is the lead writer on economics and business for The Times editorial board. He is based in Washington. @BCAppelbaum • Facebook
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